When these lessons are implemented by management, government contracting company’s business profits, resiliency, and business value all increase.
As a business valuator and business broker who spent much of his career in the Washington, DC area I have frequently worked with government contractors. For a list of industries we have prepared valuations for click here. Technically, government contractors are not a specific category of business. They get lumped into their specific underlying industry. Yet, government contractors are usually quite different from companies serving private industry.
Here are a few things I have learned.
LESSON 1 – Obtain Transferable Long Term Contracts
In order to increase transfer or business sales value long term contracts that can be transferred to a reasonable cross section of buyers should be sought out. Many government contractors have status certifications. These status certifications are important for obtaining work in a competitive market. But, if the focus is on building value also consider the effect if the status used to obtain the contract are difficult to transfer to a larger organization with capital to invest. 8(a) because of it’s limited life can be a great way to grow a firm but check carefully about transferability if you are counting on 8(a) contracts to increase your business value.
LESSON 2 – Obtain Profitable Fixed Fee Contracts
Fixed Fee contracts where you can make a profit are preferable to Time and Material contracts. Typically there are two types of contracts, fixed fee where you take the risk of the cost of performance. But, you also get the benefit of a larger profit if you can do the work for less cost. When properly managed by a government contractor that knows their costs fixed fee can be much more lucrative. Time and material allows a specified mark-up above costs. While these are safe, unless they are very large they cap your profitability at a low rate and frankly, small dollars.
LESSON 3 – Obtain multiple vehicles (contracts) to facilitate growth.
Many small government contractors win one award and think they are fine. But this leaves the company susceptible to contract termination. Contracts can terminate for many reasons often that have little to do with your performance. Government contracts can take years to obtain so set goals and begin working on this now. (Need a free goal setting / planning system, click here) Over time obtain multiple contracts so if one terminates the company has work and is still in business.
LESSON 4 – Take 8(a) contracts anyway
Due to the profitability of the right 8(a) contracts it may be prudent to continue obtaining them even if they are not transferable. Lets face it, earnings / money in your pocket today is always good. Yes, Lesson 1 is important but so are profits today. But, do not take 8(a) contracts if better less restricted contracts are available. If using this strategy both save some of the profits and look for non-8(a) work for when graduation day comes. (SBA statistics indicate that over 60% of government contractors do not survive 8(a) graduation. Don’t join this statistic.)
Obviously leadership, team building, hard work, and a little luck play a HUGE role but the four lessons shown above when properly implemented will increase business value.
Questions, want to know more, contact Gregory R. Caruso, Harvest Business, LLC, t/a The Art of Business Valuation.
Improved listening will Improve Your Leadership and Sales Results Improving Business Value
Roberto constantly meets with prospects and in machine gun fashion proceeds to tell them why he is the best tax accountant (you could put contractor, banker, auto shop….) and how he will save them money. Most politely listen and then, after 45 minutes to an hour politely find a way to leave the meeting without a full proposal or commitment to work with him.
Contrast this with Cynthia who briefly explains that she would like to address the prospect’s specific needs therefore it is best for her to start with some questions. She then proceeds to ask questions and listen in order to carefully assess their needs, budget, likely competitors in order to put together a succinct plan of action to address their specific problem. Most of her meetings result in an engagement.
Clearly an effective sales increases business value by improving the resiliency of the company.
Below is Cynthia’s secret to success –
Listening is a lost skill. It is through listening that we can truly understand others. People long to be listened to therefor effective listening will improve all your relationships and increase your value and your business value to your clients and others important to you.
What we think we “know” often gets in the way of true understanding. This happens in our businesses and in all parts of our lives. For instance, every now and then my assistant comes to me with a great idea, yet I “know” she is going to have a complaint, usually about technology. My knowing does not help either of us. Do situations like this happen to you?
A few steps to listen better:
Recognize that you have a “view.” Sort of like if you put pink glasses on. For a while everything seems pink. Then you get used to it and do not see it but it is there. That is one version of a view. My knowing as explained above is another version of a view. We all have views of everyone we “know” and almost instantly of everyone we meet.
Consciously let your view go. While doing this take 3 deep breaths and exhale slowly.
Ask your question or let the other person speak.
When they speak just listen to them very intently. Do not think about your next question or your response. Just listen.
While listening note the tone of their voice, their body language, and facial expressions. Pay attention to what is being said and what is not being said.
One more time – Listen to the answer carefully. Do not be thinking about your next question. Your next question will be better if it comes directly out of the answer just given. You can take a moment or two and think between questions. It will be interpreted as you are really listening and absorbing. Everyone likes being listened to.
Seek the answer behind the answer. What is really driving the results you see? What could change those results positively and negatively? The child’s question, “why” is remarkably powerful for digging deeper.
Listening attentively means that besides noting the response, summarize, paraphrase, and ask new open ended questions to draw out answers. If an issue is emotional in nature, empathize. Work with the person. Develop a relationship that will foster greater openness with you.
This listening skill takes an incredible amount of effort if it is not your habit. But, if you practice and train and become good at listening you will improve all your relationships including leadership and sales raising your value to all. This will improve both your personal value to your clients and your business value.
Most accountants and related professional practices fail to plan for their business or practice succession or business exit. This is a tremendous missed opportunity! Fortunately for them most accounting practices perform bookkeeping, audit and/or tax work which is reoccurring and therefore has value.
But, perhaps they do not get the price and terms they would like, fair treatment of your employees as you transition, and other factors that can be obtained – with planning and focus.
I have developed the below presentation – “7 Pitfalls to Succession and Exit Planning for Accountants and Professionals.” This was recorded at the 2021 Attorney CPA Association Conference. A summary of the Seven Pitfalls below the video highlighting high level concepts but not nearly all the details on the video. If you would like assistance with a valuation of your business or help in structuring a plan please contact us.
7 Pitfalls in Exit Planning for Accountants and Practice Owners
7 Pitfalls in Accounting and Professional Practice Succession and Exit Planning
The Laws Of Gravity Do Not Apply To Me – We all get in our own way. Get out of your way, start, do it. Most of us enjoy our practices and want things to stay the same. We also tend to believe, or at least act like we believe today is going to continue forever. But it does not. Do not be the professional who’s practice dissolves due to sickness or injury during tax season. TAKE ACTION NOW.
Your ATM Is Out Of Service Too Often – You business needs to be easy to run, predictable, and profitable. A lot like an ATM which has a simple system that produces money. Think how upset you used to be (back when you needed cash) when the ATM did not work. Your practice is the same way. Buyers become very concerned when things are not good and getting better.
There Are No Options – There are many exit options but most take five to seven years to fully implement. Start early. In fact, incorporate it into your annual planning sessions with your key staff.
Deloitte Is Going To Buy Me – Know your best buyer. Many partners and owners believe that they will be acquired or merge with a much larger firm than is likely to happen. (Right now with roll-ups in the accounting space that may happen but it is not the normal state.) Reach out to firms you think might acquire you or that you would like to have acquire you and go to lunch and discuss you far off succession plans. Ask them questions about what they will be looking for. Learn who your best buyer is and what they want and do not want.
It’s All About The Numbers – It absolutely is about the numbers but don’t discount business culture. But, in most accounting and professional practice transitions it is also about the people. Your people staying and being productive and excited and the people you are likely to work for during your transition period. Make sure you get to know who these buyers really are.
Negotiating A Transaction Is Not Like Testifying – If going to market makes sense (or even for many internal transactions) the negotiation skills to get you your best deal (the one you want) requires making a vibrant market and then having negotiation skills. These skills are not always intuitive and like any skill are honed with experience.
DIY – Don’t Do It Yourself. People pay your high hourly rates for your expertise. You know you give great value. Don’t shortchange yourself on your future and the exit from your accounting or professional practice. Put together a team including a financial planner, lawyer(s), business improvement consultant (if needed), business broker if going to market, valuation expert.
Finally – Make A Plan – Make a plan with key tasks listed AND who is responsible with a due date. Review it monthly or at least quarterly. Start today!
For a very simple exit plan form / format you can prepare in 15 minutes send us an email today and we will promptly get one to you.
Gregory R. Caruso the presenter and author of the above article has spent 35+ years putting together transactions and valuing businesses. Have a question? Reach out today.
“Daddy, I know how we get money.” Said my 3 year old son in his very deep voice.
“How?” I asked.
“We go to the ATM” he said.
Well my son was right. Prior to everything being cards and phones it was important to have cash and I would get my cash at an ATM at my bank. Often this was on the way to a family dinner and clearly my son was watching and absorbing. Building a smooth operating business improves value which is an important component of any succession or exit plan.
The ATM is really a lot like a business. You use a process to obtain money. If the process fails you are very, very disappointed. Like your business, consistency creates comfort and reduces business risk.
How can you turn your business or practice into a reliable ATM and increase your practice value?
Hire great people and train them and grow them.
Work on your business systems. “A great system is when ordinary people get extraordinary results every time.”
Develop tracking systems for key metrics of your practice and things like collections that are important but easy to ignore.
The less your practice needs YOU the more valuable it is and the less likely you are to feel you “need to get out.”
Implement how you can make your practice more “Sticky.” Sticky means your clients stick around. Repeating work like taxes, integrations that simplifying things for your clients but creating hassles to move (think about how you bank may have done this to you?) Service contracts so you are the first call, etc.
Investigate the profitability of your different products and services. Sell more of the high margin ones.
Develop a marketing and sales system that is independent of any one person. Which would you rather own? A fast food restaurant with no customer alliance to staff or a restaurant where everyone comes because of a wonderful Maître D’?
Ways to make your practice run consistently like a quality ATM are endless. Change and technology make sure this is a job that is never complete. But, when you build your practice to run like an ATM you will have more fun running it and you will increase its value enhancing your succession and exit plan.
Goal setting and planning with follow through is a proven way for professionals and business people to increase their earnings, increase their vacation time and increase their business value.
We have produced a simple guide to goal stetting which includes a quick start section so you can get started now identifying your goals and planning for success. This guide is geared for individual use and small businesses and practices.
Quick start planning and goal setting guide includes places for your Inspirational Goals, Your Aspirational Goals, and your SMART goals so you can quickly put all goals and a plan in place. After all, inspiration and aspirational goals which help pull you forward are just as important to your practice and life as your immediate goals.
In addition the quick start section encourages you to visualize your goals every day. This is a proven way to make your goals real. After all, as Napoleon Hill said almost 100 years ago, “What we believe, we can achieve.” Finally the quick start guide includes a place to record your accountability partner.
The guide then provides detail about each type of goal, why they are important and more details on processes to identify and achieve your goals. Improve your business or practice today growing your business value using our guide to planning and goal setting for professionals.
We believe that listening is a key to better serving our clients.
Improve your listening skills and improve your business valuations. Yes, it is as simple as listening.
Listening is a lost skill. It is through listening that we can truly understand others. People long to be listened to therefor effective listening will improve all your relationships and increase your value to your clients by allowing us to better serve them.
Until we listen we don’t really know what our prospects and clients want. We don’t know what they value or what success looks like to them. We “think” we know. That is an assumption and assumptions cause nothing but problems.
What we think we “know” often gets in the way of true understanding. This happens in our practices and in all parts of our lives. For instance, every now and then my assistant comes to me with a great idea, yet I “know” she is going to have a complaint, usually about technology. Do situations like this happen to you?
A few steps to listen better:
Recognize that you have a “view.” Sort of like if you put pink glasses on. After a while everything seems pink. Then you get used to it and do not see it but it is there. That is one version of a view. We all have views of everyone we “know.”
2. Consciously let your view go. While doing this take 3 deep breaths and exhale slowly.
3. Ask your question or just let the other person speak.
4. When they speak just listen to them very intently. Do not think about your next question or your response. Just listen.
5. While listening note the tone of their voice, their body language, and facial expressions. Pay attention to what is being said and sometimes what is not being said.
6. One more time – Listen to the answer carefully. Do not be thinking about your next question. Your next question will be better if it comes directly out of the answer just given. You can take a moment or two and think between questions. It will be interpreted as you are really listening and absorbing. Everyone likes being listened to.
7. Seek the answer behind the answer. What is really driving the results you see? What could change those results positively and negatively?
Listening attentively means that besides noting the response, summarize, paraphrase, and ask open ended questions to draw out answers. If an issue is emotional in nature, empathize. Work with the person. Develop a relationship that will foster greater openness with you.
This takes an incredible amount of effort if it is not your habit. But, if you practice and train and become good at listening you will improve all your relationships raising your value to others.
